making employees aware of what’s available and what solutions are best for their unique needs,” Zlatar says.

Akhil Nigam, managing director for Fidelity Labs, Fidelity
Investments in Boston, says his company is also developing
student debt solutions to focus on simplifying the complexi-ties behind repayment.

Fidelity Labs set out on a mission to revamp existing
solutions last year in response to a customer survey of its
parent company’s workplace retirement plans, Nigam says.
The study found that 80% of participants said student loans
affect their ability to save for retirement. Moreover, two-thirds had stopped or reduced plan contributions because
of student loans. The same percentage had resorted to
borrowing against their retirement plan or to taking a hardship withdrawal to cover their debt. This debt burden was
present among employees of all ages.

“The federal government allows for many different waysto repay your loans,” Nigam says. “But each of these repay-ment options can be difficult for the average consumer tounderstand in terms of eligibility requirements, how toapply and how each [option] can help.”The repayment process can be further complicated bythe fact that many student borrowers end up taking two ormore different types of loans. Each type can vary signifi-cantly depending on interest rates, repayment options, andopportunities for consolidation and forgiveness, he says.What is startling, though, is that many borrowers sign offon these loans without learning even the basics about them.According to a recent Prudential survey, 25% of currentstudents do not know whether their loan is a federal or aprivate loan.

Therefore, to ease the process, Nigam says, Fidelity’s
debt management tool aggregates an employee’s student
loans into a single interface where he can compare loan
details and develop a payment strategy. Employees also
have access to calculators and other tools whereby they can
factor in personal details such as income level and savings
to the payback equation.

Student Loans and the Bigger Picture

Many providers agree that educational resources and interactive tools are inadequate to help employees truly achieve
financial wellness. Zlater says that by using Prudential’s
loan advisory platform alone, employees can save up to a
few hundred dollars a month, which they can then redirect
to meet other financial needs such as building an emergency fund and saving for retirement, but some employees
must be motivated to do so.

Thus, she advises encouraging employees to viewstudent-loan repayment as a step in a holistic approach toachieving financial wellness. “We talk to employers aboutwhat they need in order to enable their employees to learnand adopt the behavior that will help them manage day-to-day finances, save and invest effectively, and protect againstfinancial risks such as unexpected illness or loss of income.”Brian Hamilton, vice president of SmartDollar, in Nash-ville, Tennessee agrees that simple, step-by-step guidanceand behavioral change are paramount to any financialwellness program. SmartDollar starts with encouragingemployees to build a budget and emergency savings.“Studies show that almost 49% of Americans can’t cover a$400 emergency without borrowing money,” Hamilton says.“So we want employees to set aside some money first so theycan stop borrowing each time they need something.”The program then guides employees to tackle theirconsumer debt, including student loans, by makingminimum payments on each, but devoting the most energyto the smaller debts. “We go from the smallest balance tolargest because when you pay off the smallest one, youget that quick win. And any time you want to modify yourbehavior, you want to see the quick win so you keep going.”Prudential concluded in a recent student debt study thatthe takeaway message “[is] not that students and their fami-lies should never borrow to pay for college. Rather, it is thatby borrowing from an informed position, taking advantageof other sources of funding, and managing their financescarefully, students can minimize the burden of student loandebt after graduation and improve their financial wellness.”The same study found that 56% of borrowers paying offstudent loans said they would have applied for more schol-arships and grants had they foreseen the financial burdenthey face now. Moreover, 44% said they would have savedmore, and 34% said they would have worked more while inschool.“We hear a lot of people say that, had they known whatthey know right now, they might have made differentchoices. So many of them simply didn’t know what theywere getting themselves into,” Nigam says.Still, while some employers may hesitate to invest in astudent-debt reduction initiative, the move could secure anemployer’s ability to attract and retain top talent. Accordingto the ASA survey, “Seventy-six percent of respondents saidthat, all other things being equal, if an employer offeredassistance with student loan repayment, it would be thedeciding factor or have considerable impact on their choiceto take that job.”

A recent study by Prudential Retirement found that
graduates carrying college loans say employer assistance
with repaying them is as important to their job selection as
the availability of health insurance. —Javier Simon